Issues with Shadow Mapping?
This is because you are using Cycles.
Texture baking is currently only supported in Blender internal.
This feature is currently under development, you can see some tests in the bf-cycles mailing list.
Update:
As of Blender 2.71, Cycles now supports texture baking.  To bake a texture:

UV Unwrap the model

Add a blank image texture in the UV/image editor

Add a texture node to your material and select the newly created image

Ensure that the texture node is selected

Press Bake under Properties panel &gt; Render tab &gt; Bake.


Also see:

How do I bake a texture using Cycles bake

Andrew Price's tutorial on cycles baking.